This section
includes articles from academic publications, or by economists
or others elsewhere, including foundations or institutes.

27 February 2015.In the IMF Journal, "Finance and
Development," Kevin Hjortshoj O'Rourke wrote "Whither the Euro."

Professor O'Rourke concluded the article, generally critical of the euro with the following: "If the euro is eventually abandoned, my prediction is that
historians50 years from now will wonder how it ever came to
beintroduced in the first place."

The prediction of the Single Global Currency Association is that the euro will continue to expand to more European countries and will continue as the largest and best currency until incorporated into the Single Global Currency in some way. As some point, 50 years from now and later, historians will wonder why the world took so long to adopt a Single Global Currency, and why so many economists continued to oppose it.

Q: "Thus the lesson for the future is a new single currency, as China is asking for?"

A:"Not only China is asking for it. Robert Mundell, on oe the most subtle economic minds of our time, and Paul Volcker, a very authoritative American former central banker, have been talking about it for a long time."

....we need a global system where countries agree to limit their carbon dioxide emissions: this paper outlines the Contraction and Convergence model, which proposes that countries do this within a framework of equal per capita emissions for all global citizens.... The policy answer proposed is that of the Ebcu (environment-backed currency unit) — a neutral global trading currency to be used by countries that have also signed up to the C&C model.

Excerpt from the abstract of the article....
...After identifying the institutional factors that cause conflict and poverty will be analyzed the proposal offered by Keynes at Bretton Woods to create a world reserve currency, which will be done in order to determine whether this proposal fits to the fundamentals of Cosmopolitan [Law] in the the sense of being a means of eliminating injustice removing therefore the main obstacle to the achievement of peace.

The objective of this work is to verify whether it is possible and how you can use the law to rebuild the current cosmopolitan world order according to principles of justice, a way to achieve everlasting peace and eliminate poverty. It will be exposed to the fundamentals of cosmopolitan law, contrasting them with the power relations prevailing in the international arena that are characterized as asymmetrical interdependence. Based on the premise that contemporary societies can be understood as systems that oscillate between cooperation and conflict, will be analyzing the institutional structures that underlie social tension, especially the functioning of the international monetary system. After identifying the institutional factors that cause conflict and poverty will be analyzed the proposal offered by Keynes at Bretton Woods to create a world reserve currency, which will be done in order to determine whether this proposal fits the fundamentals of Cosmopolitan Law the sense of being a means of eliminating injustice removing therefore the main obstacle to the achievement of peace.

For almost 2,500 years, countries across the world have experienced multicurrency foreign exchange (FX) transactions and its erratic currency fluctuations. The daily turnover in currency markets rose to $3.2 trillion, which was more than 10 times the world GDP. Daily volumes of cross-currency swaps grew by 281% between 2004 and 2007. International corporations were participating more actively in FX market.

The current global financial crisis has lead to rethinking of the need to reform the
international monetary and financial system. An important part of that reform will
be the future place of the Chinese yuan. That place should be large, by virtue of
the actual data of the Chinese economy, like the size of the GDP of China as a
proportion of world GDP, in addition the size of China's trade and foreign direct
investment flow. As a part of this review of the Chinese economy it’s important to
recognize the developments that happened in the internal Chinese monetary system
in order to convert the yuan to an important international currency, and then
identify the arrangements signed by China with its important commercial and
political partners to make that conversion.

The paper analyses the issues surrounding the planned implementation of the Gulf Dinar among the six members of the Gulf Cooperation Council (GCC) – the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the Sultanate of Oman, the State of Qatar and the state of Kuwait. The paper will begin with laying down the foundation of attempting to draw any similarities and differences in terms of each country’s economic fundamentals. It will then assess the grand idea for a monetary union by looking at the pros and cons, intra-regional trade, labour and capital movement and the political will of all six GCC countries. Updated issues that may have hampered the introduction of the Gulf Dinar will then be analysed by looking at the economic convergence criteria and its implications. Comparison with the European Monetary Union will be made throughout the paper, where necessary. The paper ends will then come out with a number of suggestions that may improve the implementation of the Gulf Dinar. Lastly, the paper will discuss the political implications of the implementation of the Gulf Dinar as the sole currency for the Gulf countries.

This paper has two purposes. It addresses the issue of fair value, now prescribed by the accounting standards by the International Accounting Standards Board. Fair values, as defined by the accounting standards, implies exit prices and should be viewed and applied with caution. Exit prices require the determination of what hypothetical companies might pay. This method of determining value is costly, is difficult to apply within the fIrm, distorts information for users, mixes up exit price with value in use and entry values, includes transaction costs when they should be excluded, produces information that may be of little use and is readily manipulated. Such criticism of fair value requires that we rethink the use of fair value for accounting purposes. The second purpose is to provide the econometrics of a single global currency, in comparison to fair values, which evidence justify the need for a common measure, like a common currency, for accounting purposes.

A more ambitious reform option would be to build on the previous ideas and develop, over time, a
global currency. Called, for example, bancor in honor of Keynes, such a currency could be used as a medium of exchange—an “outside money” in contrast to the SDR which remains an “inside money”.
One option is for bancor to be adopted by fiat as a common currency (like the euro was), an approach that would result immediately in widespread use and eliminate exchange rate volatility among adopters (comparable, for instance, to Cooper 1984, 2006 and the Economist, 1988). A somewhat less ambitious (and more realistic) option would be for bancor to circulate alongside national currencies, though it would need to be adopted by fiat by at least some (not necessarily systemic) countries in order for an exchange market to develop...
Nominal anchor. As a stable store of value, bancor could serve as a global nominal anchor. The variability of traded goods prices that is currently related to exchange rate volatility would be reduced. By not being tied as tightly as the SDR to the
conditions of a particular economy or a group of economies, bancor could provide greater monetary stability, especially since key central banks retain monetary control under an SDR-based system and their respective economies and currencies would be expected to face episodic stresses and volatility (such as higher inflation or deflation).
[pages 27-28]

This
analysis shows that a SGC offers extensive benefits with
primarily superficial obstacles so the true catalyst for
change is a paradigm shift in global currency principles.
This paper asserts the value of a SGC and the ideal of it
being the end-state of world currencies even though it would
obviate the need for the reserve currency strategy proposed.
The move to a single reserve currency and SGCBs [supra-global
currency central banks] can act as a tool to shift perceptions
about a SGC and it is anticipated that as nations move into
structures like the EMU they would be convinced of the value
of a supra-national currency for commercial use....

"The recent global financial turmoil brought
the world to the brink of monetary collapse, and reminded
us yet again that the current multicurrency system has excessive
risks and costs. The only long term alternative is to deliberately
move to a single global currency, managed by a global central
bank within a global monetary union, and the time to begin
planning is now."

"This paper provides a theoretical algebraic representation
of the problem [accounting for inflation, globally] and
proposes that a permanent solution to the problem is the
introduction of a single global currency. A single
global currency could ensure that all countries have the
same rate of inflation (if any) and all financial reports
could be measured using the same monetary unit....."

The
way to a single Global Currency (for advanced countries)
could be cleared through the reduction of different currencies,
but would only make sense if there was also policy coordination
on many other issues.

From the abstract:
"The paper discusses how a globally integrated system,
with a world government, a world parliament and a world
central bank as its components, is no longer an idealistic
concept."

And from the
article: "One can see that in such an integrated
global system, a world central bank with its own international
currency will tackle some of the international financial
challenges currently facing financial markets and financial
institutions....

[For more
about Fariborz Moshirian's support of a Single Global Currency
see below:

It begins with a historical review and a summary
of fixed versus flexible exchange rate systems. Then it
compares the experiences of recent currency unions, mostly
unilateral, and their relative economic performance during
the past currency crises in Latin America, East Asia and
Eastern Europe. A set of issues is discussed in order to
weigh the overall costs and benefits for several economies....

Free
banking is also considered in a fast-changing world where
there will probably be fewer but better currencies. Not
just the euro is a reality now, but maybe the "amero" and
the "worldo" or the "mondo" very soon.

[Jose Cordeiro
is a member of the Board of Advisors of the Single Global
Currency Association.]

"The
current paper analyses the similarities between the Bretton
Woods system (BWS) and the Eurozone and looks into the future
of the world monetary system. The gold standard, the Keynes
Plan and the White Plan are identified as the most important
sources of ideas that formed the BWS.... The Eurozone is
also considered good practice for any reform of the international
monetary system. Given the diverging political and economic
goals of the major currency blocks, it may be questioned,
however, whether the success of the euro also furthers the
idea of developing a single world currency."

20 May
2008. William Steding, graduate student at Norwich University
in Vermont, U.S., writes, "The
Globo", about a Single Global Currency.

Excerpt from
the essay...

"The most effective form of simplification
and stabilizing influence has been largely ignored by both
statesmen and scholars of international political economy:
constructing a path to a global currency – the “globo.”
In the same way that the Bretton Wood's fixed-rate exchange
system and gold-backing are artifacts of the global financial
system, so too is a world of 140+ currencies that lean on
the back of the dollar. The path to a global currency is
one of gradual contraction; spurred by financial crises;
enlightened sovereignty; accompanied by institutional maturation;
and supported by hegemonic leadership....

Notwithstanding
the hundreds of billions of dollars in transaction costs;
the negative effects on trade, asset values and GDP; pesky,
omnipresent current account imbalances; dis-economic, zero-sum
business decisions; and induced volatility due to currency
speculation; in my view, the greatest argument for one global
currency – the globo – is the simple fact that in the complexity
globalization provides and accelerated velocity of currency
trading, we are losing our capacity to serve the three functions
of monetary management: liquidity, adjustment and confidence.

[This paper
should inspire others to think and write about a Single
Global Currency.]

Nonetheless,
I conclude with emphatic conviction that the benefits of
a single global currency greatly outweigh the costs. Therefore,
the currency is recommended for adoption by developing countries.
This need not mean immediate adoption, but it must be acknowledged
that the current multicurrency framework is unsustainable,
and every day the poor lose out from the arrangement. Mobilizing
the masses to prepare for the massive transition to a global
currency must therefore begin immediately. It is an economic
and ethical imperative, a remedy that hurts few and helps
many.

The need for a single global currency is not only immediate,
it is pressing. As the international financial system and
day-to-day transactions become increasingly electronic and
inter-connected between people and nations, the boundaries
of monetary nationalism are being constantly eroded. Nonetheless,
if we continue down the multicurrency path into a fully
electronic and perfectly mobile financial system, and if
national currencies survive this transition, we risk permanently
ceding the ability to make worldwide monetary reforms possible.
We cannot delay.

" 'A global economy requires a global
currency?' - Paul Volcker, former US Fed-eral Reserve Chair.
How does this sound? A single currency
for the whole world! Doubts had been raised when Euro was
adopted by the EU countries. The practicality of single
currency for Europe was questioned. But 'Single Global Currency‘
takes the economics to a whole new level. Does it sound
superfluous? Well, all I can say is -think about it....

This theory is doing rounds in USA and Europe but
has not really caught up in Asian countries. We, the students
at IIFT Kolkata, have taken the initiative

to
spread the word in India through articles in media. And
we start it with our very own finance magazine, Infineeti."

[Good work
Ankur! The movement toward a Single Global Currency
is gaining momentum around the world.]

This
paper submits that the advantages gained by introducing
a single currency at the domestic level, equally applies
to the economy at the global level. The advantages gained
are, 1. a reduction of the inflation rate to one common
rate (if required) amongst all countries, 2. a possible
reduced interest rate, 3. an expansion in investment, 4.
an increase in development and trade due to the removal
of uncertainty, 5. the reduction in transaction costs, and
6. the reduction in the cost of capital (Moshirian, 2004,
p. 306). A single global currency has immediate implications
in international accounting. It presents an opportunity
for the permanent removal of problems associated with accounting
for inflation. This paper addresses the phenomenon of inflation
and how accounting measurement and valuation associated
with inflation is removed by the introduction of a single
global currency.

Implementing the Single Global Currency will bring
considerable benefit to almost everyone in the world and
business can play a substantial role in moving the world
in that direction. The years 2024, 2034 or even 2044 are
not so far away that business cannot begin researching,
planning and organizing now.

The "tear sheet copy" states, "The following
annotation will appear in the June 2007 issue of the Journal
of Economic Literature (Volume 45, No. 2) and in the
American Economic Association's electronic publications:
e-JEL, JEL on CD, and EconLit.

Explores
the benefits of a single global currency, managed by a global
central bank within a global monetary union. Discusses
the expensive, complex, and hazardous multicurrency foreign
exchange world; coping with the multicurrency foreign exchange
system; economists viewing the pre-euro multicurrency system
and its exchange rate regimes; monetary unions; the single
global currency - origin, benefits, and costs; economists
viewing the single global currency; how to get there from
here; and the single global currency world - in 2024.
Bonpasse is Founder and President of the Single Global
Currency Association. Bibliography; index.

The
purpose of this paper is to highlight the evolution of financial
institutions in the context of increasingly volatile foreign
exchange markets. The paper discusses the importance of
the formation of a single currency in the US in the 19th
century and the formation of the Euro in the 20th century
for reducing volatility in foreign exchange markets that
have assisted financial institutions' international business
expansion. The paper also considers some of the key assumptions
of an optimal currency theorem such as labour mobility and
argues that in the 21st century, more comprehensive financial
market integration and a single global currency could emerge,
provided that capital mobility and hence foreign capital
flows continue meeting labour in the host countries for
production rather than the other way round.

by Jannie Rossouw
in the South Africa Journal of Economics, Volume 74 Page
382 - September 2006 The abstract reads....

One of the goals
of the Southern African Development Community (SADC) is
macro-economic convergence leading to monetary unification
and a single central bank. This goal is aligned with the
goal of the African Union to build a monetary union for
the entire continent in stages, starting with each of the
subregions, of which SADC forms one important region. Despite
views to the contrary, the current degree of compliance
with the Maastricht criteria for convergence and membership
of the European Union, shows that the challenges
facing a SADC monetary union would not be insurmountable
if the convergence criteria are viewed as permanent goals,
rather than preconditions.

1.
"Proposal for a Common Currency among Rich Democracies"
by Richard Cooper.

2.
"One World Money, Then and Now" by Michael Bordo
and Harold James,

3.
"Exchange Rate Arrangements and Disarrangements: Prospects
for a World Currency", a discussion of both articles
bySergio Schmukler.

Abstract
for all three.....

Paper 1: This paper suggests that
some time in the not-too-distant future the governments
of the industrialized democracies – concretely, the United
States, the European Union, and Japan – should consider
establishing a common currency for their collective use.
A common currency would credibly eliminate exchange rate
uncertainty and exchange rate movements among major currencies,
both of which are significant sources of disturbance to
important economies. One currency would of course entail
one monetary policy for the currency area, and a political
mechanism to assure accountability. This proposal is not
realistic today, but is set as a vision for the second or
third decade into the 21st century. Europeans, in creating
EMU, have taken a major step in the direction indicated.
Their idea could be taken further. Paper 2: In this paper,
we look at the major arguments for monetary simplification
and unification before explaining why the nineteenth century
utopia is an idea whose time has gone, not come.

by
Eiji Ogawa and Kentaro Kawasaki, a Discussion
paper from Research Institute of Economy, Trade and Industry
(RIETI), Japan.

Abstract:

East Asian countries, for example "ASEAN plus
three countries" (China, Korea, and Japan), have been well
cognizant of importance of the regional financial cooperation
since the Asian currency crisis in 1997. They have established
the Chiang Mai Initiative (CMI) to manage currency crises.
However, the CMI is not designed for "crisis prevention"
because it includes no more than soft surveillance process
as well as a network of currency swap arrangements. The
surveillance process should be conducted over intra-regional
exchange rates and exchange rate policies of the regional
countries in order to stabilize intra-regional exchange
rates in a situation of a strong economic relationship among
the regional countries. On one hand, the regional exchange
rate stability is related with an optimum currency area.
Based on a Generalized PPP model, which detects a cointegration
relationship among real effective exchanges rates, we investigate
whether the region composed of "ASEAN plus three countries"
is an optimum currency area. In the investigation, our interest
is focused on an issue whether the Japanese yen could be
regarded as an "insider" currency as well as other East
Asian currencies. Or, is the Japanese yen still an "outsider"
which is used as a target currency of foreign exchange rate
policy for other East Asian countries. We employ a Dynamic
OLS to estimate the long-term relationship among the East
Asian currencies in a currency basket. Our empirical results
indicate that the Japanese yen works as an exogenous variable
in the cointegration system during a pre-crisis period while
it works as an endogenous one during a post-crisis period.
It implies that the Japanese yen could be regarded as an
insider currency as well as other East Asian currencies
after the crisis although it is regarded as an outsider
currency as well as the US dollar and the euro before the
Asian crisis.

by Tsangarides,
Charalambos G. and Ewenczyk, Pierre of the IMF and Hulej,
Michal of the University of Warsaw.

From the summary
at the IMF site:

This paper explores
and quantifies several aspects of the performance of currency
unions using an augmented version of the gravity model and
focusing on two samples, the world and Africa. Our empirical
findings suggest that, in principle, membership in a currency
union should benefit Africa as much as it does the rest
of the world. In addition, we find evidence from both samples
that the effect of currency unions on trade is large, almost
a doubling; currency unions are associated with trade creation,
increase price co-movements among members, and make trade
more stable; and longer duration of currency union membership
brings about more benefits, although with some diminishing
returns.

The case for monetary simplification and unification
has been made since the middle of the nineteenth century.
It rests on four principal arguments ;reduced transaction
costs; establishing credibility; preventing bad policy in
other states; political integration via money. In this paper
we argue that the case for monetary integration is becoming
increasingly less persuasive. In making our case we posit
a different concept of money to the one that underlay the
nineteenth century discussions which we term "Newtonian"
since it was based on the assumption of a single reference
external to the state reflected in the definition of value
in terms of precious metals. In the twentieth century, views
of money have shifted to a more " Einsteinian"
or relativistic conception. Measures of value that move
relative to each other are helpful in terms of dealing with
large shifts in relative prices that affect different countries
very differently. In the current age of globalization, "Einsteinian"
money is capable of accommodating shifts that were politically
destructive in the " Newtonian" world.

15
November 2005. Dissertation, "Single
Global Currency" (in German) by Steffen Kanz
of Gotha, Germany at the International
Management International Business School at the Bad Homburger Academy.
This paper discusses the work of Robert Mundell and the
Single Global Currency Association, and the prospects for
a single global currency.

[Also
linked is a partially translated, by "Google",
version
in English. When "Google's efforts
are supplemented by humans, a more complete translation
will be posted here.]

This
paper develops the basis for monetary and exchange rate
coordination in Asia as part of a package of monetary integration
that could support growth and poverty reduction. This could
be achieved directly through coordinated exchange rate stabilization,
and indirectly through the implications of this for reserve
pooling and investment in an Asian development fund (ADF)
and through development of the Asian bond market (ABM).
Macro policy coordination could be viewed as a necessary
condition for further development of both reserve pooling
via the Chiang Mai Initiative (CMI) and of the ABM. The
paper analyzes the trade structure of ASEAN and China in
terms of both geographic sources of imports and markets
for exports, and of the commodity structure of trade. The
similarities of the geographic and commodity trade structures
across the region are consistent with adoption of a common
currency basket for stabilization, and with an argument
for monetary integration across the region along the lines
of Mundell (1961) on optimum currency areas. The paper constructs
currency baskets and real effective exchange rates (REERs)
for the countries in the region. Since their trade patterns
are quite similar and their policies are already implicitly
coordinated, their REERs tend to move together. This means
that ASEAN and China are already moving toward integration
in practical effect. Explicit movement toward coordination
could support surveillance and reserve-sharing under the
CMI, and release reserves to be invested in an ADF.

Abstract of
this important article which deals with a concern of many
economists who consider monetary unions: the coping with
"shocks"...

In
this paper we analyze the nature of the shocks hitting the
EMU member countries over the period 1991-2004, as well
as for the two subperiods before and after 1999, i.e., the
start of EMU. To this end, we first evaluate the relative
importance of symmetric vs. asymmetric shocks, and then
extract their temporary component. Our final aim would be
assessing the vulnerability of the EMU countries to temporary
and asymmetric shocks, which would be the most harmful case
for the operation of a monetary union.

This paper investigates operational hedging by firms
and how operational hedging is related to financial hedging
by using a sample of 424 firm observations, which consist
of 212 operationally-hedged firms (firms with foreign sales)
and a size and industry matched sample of 212 non-operationally-hedged
firms (firms with export sales). We find that non-operationally-hedged
firms use more financial hedging, relative to their levels
of foreign currency exposure, as measured by the amount
of export sales. On the other hand, though operationally-hedged
firms have more currency exposure, their usage of financial
derivatives becomes much smaller than that of exporting
firms. These results can explain why some global firms use
very limited amount of financial derivatives for hedging
purpose despite much higher levels of currency risk exposure.
We also show that hedging increases firm value.

The Swedish referendum in September 2003 on adopting
the euro or keeping the domestic currency, the krona, represents
a unique event to examine the public's perceptions of the
benefits and costs of monetary unification. The voters chose
between the two polar cases of exchange rate regimes: Either
a freely floating exchange rate or membership in a monetary
union.

Three major conclusions emerge from the analysis of the
exit poll surveys gathered on the day of the referendum.

First, the optimum currency area theory proves to be a constructive
framework to predict voting behaviour across socio-economic
groups and regions in Sweden, assuming voters behave in
their self-interest.

Second, the distribution of the expected benefits and costs
across groups was a major determinant of their voting behavior.
As predicted by theory, the Yes-vote was strongest among
voters employed in the tradable sector, in high growth regions
as well as among high-income earners and well educated.
The No-vote was strongest among voters employed in the non-tradable
sector, in particular in the public sector, and among low-income
earners, the unemployed and the less educated - in short,
among groups dependent on public-sector transfers to maintain
their living standards in the event of adverse economic
shocks.

Third, political attitudes towards the European integration
process heavily influenced the views of the voters towards
the euro.

We find that risk sharing in the European Union (EU)
has been increasing over the past decade due to increased
cross-ownership of assets across countries. Industrial specialization
has also been increasing over the last decade, and we conjecture
that risk sharing plays an important causal effect by allowing
countries to specialize without being subject to higher
income risk even though the variability of output may increase.
We believe that lower trade barriers may not have played
a dominant causal role during this decade, because the effect
of lower trade barriers has probably already played itself
out. We further find that the asymmetry of GDP fluctuations
in the EU has declined steeply over the last two decades.
This may be due to economic policies becoming more similar
as countries were adjusting fiscal policy in order to meet
the Maastricht criteria; however, a similar result was found
for U.S. states so the finding may be due to a different
nature of the shocks to the world economy in the 1990s.
We expect to see a further rise in risk sharing between
EU countries, accompanied by more specialization. The resulting
increase in GDP asymmetry should be minor, however, and
will have small welfare costs, because increased risk sharing
should lower income (GNP) asymmetry.

We investigate how the exchange rate regime influences
economic linkages across countries. We divide the exchange
rate regime into three classifications: currency union,
peg and floating exchange rates. Unlike most studies solely
focusing on the relationship between anchor and client countries,
the exchange rate regime between any two countries is inferred
based on their relationship to the common anchor currency.
Then we empirically explore how the various exchange rate
regimes impact on bilateral trade, output co-movement and
financial integration. Financial integration is measured
by the degree of risk sharing reflected in consumption co-movement
relative to output comovement. We find that, while currency
union has the greatest effect, the peg regime also significantly
boosts trade. We also find that, while the peg regime contributes
to both output and consumption co-movements, the currency
union strengthens only consumption co-movement and possibly
lowers output co-movement. These findings are interpreted
that the currency union, the strictest form of pegged regimes,
leads to higher industry specialization and better risk
sharing opportunities than the less strict peg regime.

This paper examines the impact of European Monetary
Union (EMU) accession on bilateral Portuguese international
borrowing patterns. Using a difference-in-differences methodology,
I demonstrate that Portugal's accession to the EMU was accompanied
by a change in its borrowing pattern in favor of borrowing
from its EMU partner nations. This extends the evidence
in the literature that overall international borrowing is
facilitated by the creation of a monetary union, and raises
the issue of financial diversion. The results are shown
to survive a wide variety of robustness checks and are corroborated
by preliminary evidence concerning Greece's accession to
EMU in 2001.

There is increasing interest in regional trade, investment,
and currency blocs, and in the optimal public policies for
such blocs. There is also much managerial interest in the
co-movement of exchange rates in a region. The Eastern Caribbean
Currency Bloc is one of only three (and one of the longer
lasting) multi-country common central banks in the world
and is the only such bank in which member countries pool
all their foreign reserves. While it is an important economic
region especially for the United States, most studies of
regional exchange rate relationships have not examined the
nature of Caribbean exchange rates. This paper documents
for the first time that purchasing power parity holds for
each exchange rate and many real exchange rates are cointegrated
and move in a bloc in the Eastern Caribbean region over
the 1980s and 1990s.

In this paper we discuss selected aspects of Poland's road
to the euro zone. Our attention focuses on the proper design
of macroeconomic policy during the accession period. We
address the issue of entering ERM II, with special attention
to the choice of central parity, fluctuation bands, possible
revaluation of the parity and sharing the burden of interventions
with the ECB. Further we concentrate on the issue of a simultaneous
fulfilment of all convergence criteria. We point at the
central role of fiscal austerity in providing a save framework
for fulfilling the inflation, exchange rate and, obviously,
the public deficit criteria. The key role of timing is accentuated.

"...
The fact that otherwise-sovereign states within the United
States are not legally allowed to issue their own currency,
thus creating a single currency zone for the whole United
States based on the U.S. dollar, is commonly usd as an example
for emulation and as justification for policy choices, such
as the current move toward a European currency union based
upon the euro...."

Although
entering a currency union involves both costs and benefits,
an increasing body of research is finding that the benefits
– in terms of international trade creation –
are remarkably large.
For example, Rose (2000) suggests that countries can up
to triple their trade by joining a

currency
union. If true the impact on trade, income and welfare should
Iceland join EMU could be
enormous. However, by focussing simply on EMU rather than
the broad range of currency unions
studied by Rose, we find that the trade impact of EMU is
smaller – but still statistically

significant
and economically important. Our findings suggest that the
Iceland's trade with other EMU
countries could increase by about 60% and that the trade-to-GDP
ratio could rise by 12 percentage
points should Iceland join the EU and EMU. This trade boost
could consequently

raise
GDP per capita by roughly 4%. These effects would be even
larger if the three current EMU holdouts (Denmark, Sweden
and the UK) were also to enter EMU.

An increasing
number of countries have adopted inflation targeting since
New Zealand first adopted this framework in early 1990.
Currently there are 21 countries using inflation targeting
in every continent of the world. This paper discusses the
economic effects of inflation targeting. The main conclusion
is that inflation targeting has largely been a success.
The new framework has made central banks, which previously
lacked credibility, able to change the way they do monetary
policy towards what is commonly considered best practice.
In many respects they have even been leading in creating
a new benchmark for how to formulate monetary policy.

Prior empirical research has been unable to forge
an unambiguous link between foreign currency translation
adjustments, which are an element of other items of comprehensive
income, and firm valuation. This study adds to the existing
literature by empirically testing the value relevance of
foreign currency translation adjustments in an earnings
and book value model. Interaction terms, which serve as
proxies for the theoretical sources of exchange rate exposure,
are included in the estimating equation. The main finding
of this study is that foreign currency translation adjustments
are significantly value relevant when their parameter estimates
are allowed to vary in the cross-section.

This paper studies
firm-level investment in the wake of the Mexican peso crisis
of 1994. While exporters outperform nonexporters in terms
of profits and sales after the devaluation, their investment
is constrained by weak balance sheets. Specifically, we
find that firms with heavy exposure to short-term foreign
currency debt before the devaluation experienced relatively
low levels of post-devaluation investment. The data also
imply that increased sales uncertainty after the peg's collapse
deterred investment, particularly in the tradable sector.
The results confirm the recent theoretical literature's
focus on weak balance sheets as driving the recessionary
impact of devaluations in emerging markets.

[Much has
been written about how countries have to keep their own
currency so they can respond to "shocks" by devaluing their
currencies so they can increase exports, but not much about
the downsides of such devaluations. Hence the value
of this article.]

In recent years
the euro area has shown less resilience to the negative
and largely OECD-wide common shocks than the English-speaking
countries, but most of the smaller euro area countries have
fared better than the large ones. This paper reviews policy
issues that are important in fostering a speedy adjustment
to shocks. We argue that the small countries are well placed
to adjust swiftly to asymmetric shocks, because they are
well integrated with the rest of the area. An activist fiscal
policy is not needed and also not powerful enough to smooth
the cycle....